Markets post-Brexit vote

  • Pound sheds more than 2 percent after plummeting last week on Brexit news
  • Uncertainty sparked by Britain's vote to leave the EU hurts risk appetite
  • Asian stocks fall amid Brexit jitters
  • Demand for safe haven assets like gold rises

Asian stocks fell and the British pound tumbled more than 2 percent on Monday as markets struggled to shake off deep uncertainty sparked by Britain's decision to leave the European Union.

Sentiment remained weak even though the worst of the turmoil seen on Friday, when global stock markets suffered their biggest decline in nearly five years, had eased.

"Things are so uncertain that investors still do not have a clear idea how much risk assets they need to sell," Hiroko Iwaki, senior foreign bond strategist at Mizuho Securities, said on Monday.

"But it is safe to assume investors are not yet done with all the selling they need to do. I wouldn't be surprised to see another 10 percent fall in share prices," she added.

Among many questions the British exit, or Brexit, has triggered are just how much UK and European economies will slow, how they will negotiate their new relationship and how European leaders will try to boost the crumbling EU.

READ MORE: Brexit worse on GBP than 2008 financial crisis

US S&P mini futures, the world's most traded stock futures, fell 0.4 percent to 2,011.50, hovering close to Friday's three-and-a-half-month low of 1,999.

MSCI's broadest index of Asia-Pacific shares outside Japan shrank losses to 0.6 percent as companies with UK exposure in particular came under more pressure.

Financials led declines in Australia and Hong Kong with the sector seen among the worst hit by Brexit and the prospect of London losing its prized "EU passport".

"We think Brexit could just be the first surprise in a re-calibration of the world away from globalisation towards more inward-looking policymaking," Ajay Singh Kapur, equity strategist at Bank of America Merrill Lynch in Hong Kong, wrote in a note.

"Brexit has now possibly opened up more uncertainty about the European Union project, and that the already beaten-down Asian and emerging equity markets could receive asset allocation flows from Europe," he added.

Euro under pressure

Japan's Nikkei extended gains to 1.9 percent, a partial rebound after Friday's hefty 7.9 percent fall. Japanese stocks were helped by stronger warnings from Japanese officials that they may intervene in currency markets to stabilise the yen.

Still, the dollar fell 0.3 percent against the safe-haven yen, trading around 101.81 yen.

Chinese shares also gained, with the CSI 300 index and the Shanghai Composite both up about 0.8 percent.
The British pound fell 2 percent to $1.34, still some distance from the 31-year low of $1.3228 touched during Friday's wild trade.

The euro also came under further pressure, falling 0.8 percent against the dollar, as investors fret that Brexit could stoke the anti-establishment mood in Europe and even talked of disintegration of the union.

READ MORE: After Brexit vote, what happens next?

"[There will be] sell-off in the euro as talk of other exit referenda builds," said Jerome Booth, chairman of New Sparta Asset Management in London.

"This sell-off will be more profound and long-lasting and will be not just against the dollar and yen but also against the pound. It will also raise fears of significant loss of values for holders of Eurozone government bonds."

The euro fell to $1.1028, edging closer to Friday's three-and-a-half-month low of $1.0912.

The euro's weakness helped to push the Chinese yuan to its weakest level against the dollar since December 2010 on Monday.

It fell to 6.6396 per dollar after opening at 6.6360 per dollar, compared with the five-and-a-half-year low midpoint level of 6.6375 set by the central bank, and touching an intraday low of 6.6469.

But in a sign that Britain's shock decision to leave the European Union may be encouraging Europeans to seek the safety of the status quo, support for Spain's conservative People's Party (PP) surged in Sunday's general election.

Oil prices fell more than 1 percent in early trade, with international benchmark Brent futures down 0.3 percent to $48.28 per barrel.

US crude slipped 0.5 percent to $47.40.

Demand for safe haven assets such as government debt and precious metals remained strong. Gold rose 0.6 percent to $1,323.68 per ounce.

Source: Agencies